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Friday, November 11, 2011

Global Financial Crisis II: maybe it's not coming to an economy near you after all

Wall Street shares have risen by between 7 per cent and 10 per cent in five trading days, depending on which share index you follow. Europe's main market index is up 8.5 per cent in the same time. Our market has rallied 9 per cent, or by 15 per cent if you swapped unhedged from US dollars into Australian dollars to get on board: the Aussie dollar is back to parity and up about 6 per cent in a week.

This is all about psychology. The market's hive mind is suddenly hopeful that this year's crisis will not have a second leg. But if the hive mind proves right, the rally will accelerate sharply.

The 2008-09 global crisis is a guide to where we are at now. Until September 15, 2008, it was a market event. Asset prices were falling as write-offs proliferated, but the impact on the real economy was still being debated.

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But the collapse of Lehman Brothers on September 15 and the rescue of many other massive financial institutions that followed generated a second, concussive wave.

What hes saying is the markets might stay fine and stable. However that only helps few, doesnt make a difference to the majority. The worst thing than can happen for europe and america is to keep tugging along the euro and federal reserve dollar. It just keeps these fucks in power.